Peanut Economics and Education Program for Georgia
Georgia Peanut Commission Research Report Day
February 11, 2015
Project Objective
• Economics educational programming
– Analysis of cost of production and returns
– Market outlook and alternatives
– Policy education
Cost and Returns Analysis • Peanut Budgets updated annually
– Non-irrigated Peanut,
– Irrigated Peanut,
– Non-Irrigated Strip-Tillage Peanut and
– Irrigated Strip-Tillage Peanut
• Crop Comparison Tool
– Tool includes peanut price calculator and crop price comparisons to give equal returns.
• Machinery Cost Analyses at request from county agents.
Changes to 2015 Budgets
• Lower chemical and fuel costs ↓
• February update will show lower insurance cost due to lower projected price. $424/ton currently vs. $532/ton in 2014
SUMMARY OF SOUTH GEORGIA CROP ENTERPRISE ESTIMATES, 2015
By A.R. Smith, N.B. Smith and W.D. Shurley, UGA Extens ion Economists , Department of Agricultura l and Appl ied Economics
January 2015 Estimates
Conventional Tillage
EXPECTED YIELD per ACRE 4,700 lbs 3,400 lbs
EXPECTED SEASON AVG PRICE $400 /ton $400 /ton
GROSS RETURN per ACRE
VARIABLE COSTS per ACRE
TOTAL VARIABLE COSTS per ACRE
RETURN ABOVE VARIABLE COST per ACRE
TOTAL COST EXCL. LAND & MGT per ACRE
RETURN TO LAND AND MGT per ACRE
BREAKEVEN PRICE (Total Costs) $402 /ton $419 /ton
BREAKEVEN YIELD per ACRE 4,722 lbs 3,558 lbs
$712
-$4 -$32
$680$940
$130
$550
NON-IRRIGATEDIRRIGATED
Peanuts
$653
$287
$944
Peanuts
Does not include land rent, add $50 to $100 for Return to Management
Comparison of 2015 Estimated Net Returns, Georgia, Irrigated
Corn Cotton Grn Sorgh Peanuts Soybeans
Expected Yield 200 1,200 100 4,700 60
Expected Average Price1 $4.25 $0.70 $4.04 $386 $9.75
Crop Income $850 $840 $404 $906 $585
Variable Costs2 $662 $524 $349 $653 $294
Net Return Per Acre Above VC $188 $316 $54 $253 $291
Net Return per Acre Above VC & $185 Land Rent $3 $131 ($131) $68 $106
1/ Expected average price.
2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, UGA
Comparison of 2015 Estimated Net Returns, Georgia, Non-Irrigated
Corn Cotton Grn Sorgh Peanuts Soybeans
Expected Yield 85 750 65 3,400 30
Expected Average Price1 $4.25 $0.70 $4.04 $386 $9.75
Crop Income $361 $525 $262 $656 $293
Variable Costs2 $313 $423 $349 $653 $294
Net Return Per Acre Above VC $48 $102 ($87) $3 ($1) Net Return Per Acre Above VC + $75 Land Rent ($27) $27 ($162) ($72) ($76) 1/ Expected average price.
2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, University of Georgia
Covered Commodities Planted on Farms with Generic Base
• PLC for peanuts likely to trigger in 2015, resulting in roughly $100 per ton payment.
• ARC-County likely to trigger for corn, grain sorghum, soybeans and wheat.
• Estimated Average Maximum ARC-County payment in GA (using state yields):
–Corn $0.50, Soybeans $0.75, Wheat $0.40.
Comparison of 2015 Estimated Net Returns, Georgia, Non-Irrigated, Generic Base
Corn Cotton Grn Sorgh Peanuts Soybeans
Expected Yield 85 750 65 3,400 30
Expected Average Price1 $4.75 $0.70 $4.54 $475 $10.50
Crop Income $404 $525 $295 $808 $315
Variable Costs2 $313 $423 $349 $653 $294
Net Return Per Acre Above VC $91 $102 ($54) $155 $21 Net Return Per Acre Above VC + $75 Land Rent $16 $27 ($129) $80 ($54) 1/ Expected average price.
2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, University of Georgia
Comparison of 2015 Estimated Net Returns, Georgia, Irrigated, Generic Base
Corn Cotton Grn Sorgh Peanuts Soybeans
Expected Yield 200 1,200 100 4,700 60
Expected Average Price1 $4.75 $0.70 $4.54 $475 $10.50
Crop Income $950 $840 $454 $1,116 $630
Variable Costs2 $662 $524 $349 $653 $294
Net Return Per Acre Above VC $288 $316 $105 $463 $336
Net Return per Acre Above VC & $185 Land Rent $103 $131 ($80) $278 $151
1/ Expected average price.
2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, UGA
Don’t Overplant Peanuts
• Implications on rotation, hurt yield by shortening rotations.
• Overplant and drive price down leads to fewer acres to reach the payment limitation of $125,000.
• Risk of excessive program cost.
PLC Payment Rate $100 PLC Payment Rate $150
Payment Yield 3000 3500 4000 4500 Payment Yield 3000 3500 4000 4500
Payment $/Acre $150 $175 $200 $225 Payment $/Acre $225 $263 $300 $338
Acres to Reach Payment Limit 980 840 735 654
Acres to Reach Payment Limit 654 560 490 436
Peanut Market Outlook Presentations • 25 Local Meetings
• 24 Regional and Industry meetings • Ga Peanut Farm Show
• UGA Ag Forecast
• National Peanut Buying Points Association
• Ga Peanut Achievement Club
• Ga Peanut Tour Hot Topics
• Southern Extension Agricultural Outlook
• In-Service Trainings for County Agents – Farm Business Management Series
– Foundations Trainings for New Agents
– Peanut In-service Training for County Agents
– County Agent Field Day
– Farm Bill
Marketing Outlook • Local media outlets through county radio interviews and UGA
CAES news releases
• Peanut Perspective – Southeastern Peanut Farmer
• Ag Forecast
• Selig Center Economic Outlook – Terry College of Business
• Ag First
• Extension Southern Outlook Conference
• SE Farm Press
• WTIF Market Mondays
• 92.5 WZZK The Farm
Farm Bill Education • Feb 24 –Farm Bill and Peanuts Webinar with GPC (500)
• Feb 26, Nov 24-25, Dec 2-3, Dec 11 – County Agent Training
• Apr 4,7,8,10,11,14 - Regional Meetings – Base Reallocation and Yield Update decisions
– ARC PLC Program choice
– Generic Base
• Apr 24 - Southern Risk Management Education Center Webinar
• Sep 3 - Peanut Presentation at the National Farm Bill Extension Education Conference (150)
• Dec 12-19 - 10 Regional Meetings with FSA, RMA, GA Farm Bureau, Farm Credit (1,600)
• 25 county meetings (1,535)
Let’s Talk About Program Decisions 1. Yield Update is a no brainer… take advantage of this if you can
- 90% of the 2008 to 2012 yield/planted acre (Years where crop not planted don’t matter)
2. Base Reallocation – do you want to have your government safety net tied to current base or closer to what you are planting now? - weighted based on 2009 to 2012 covered crop plantings - operators with generic bases will have choices and plenty to do
3. ARC or PLC – Peanuts is pretty straight forward. PLC is projected to give higher expected net payments in most all cases.
Producer Price Outlook a Factor in ARC/PLC Decision (Peanuts Ex.)
557.33 557.33 557.33
535.00 535.00
350
400
450
500
550
600
650
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
$/t
on
Dec. 2014 FAPRI Prices
Benchmark Price
86%
76%
Ref Price
Economic Studies • New Cultivar, Row Pattern and Seeding –Tubbs
• Economic Assessment of the Peanut Replant Decision - Tubbs, Sarver
• Comparing Water Use Efficiency of Various Irrigation Methods Used for Peanut Production - Hawkins
• Alternatives for Thrips Control – Srinivasan
• Fungicide Treatment Trials
• Rotation - Tubbs
DEVELOPING AN ECONOMIC DECISION
AID TOOL FOR REPLANTING PEANUT
Carlos J Ruiz Master of Agribusiness University of Georgia Nov 21st - 2014
Predicting the cause of sparse plant stand and potential yield is challenging making replant decision uncertain.
Poor peanut emergence results in lower yield and loss of revenue.
Can recent research results help make better replanting decisions?
Replant or not
When to replant
How to replant
BACKGROUND
TOOL
Sparse crop Replanted crop
Yield (Pounds per acre) Yield (Pounds per acre)
Gross Revenue Cost of replanting
Net Gross Revenue from Replanted Crop
Net Benefit?
Gross Revenue from Initial Crop
DATA
Original Planting Model Data Replanting Model Data
Observations 490 351
Row Pattern 2 (Single - Twin) 2 (Single - Twin)
Locations Tifton, Attaplugus, Plains, Midville Tifton, Attaplugus, Plains,
Time 2008-2013 2009-2013
Variables
Yield Yield
Seed Rate (2-8.9) Seed Rate (1-6)
Plant Stand (1-6.9) Replanting Date (Early May –
Late June) Sarver and Tubbs Sarver, Tubbs, Beasley, Paulk
METHODS-Models
Plant stand density has a positive and statistically significant effect on peanut yield (p =0.0084)
𝑦𝑖𝑒𝑙𝑑 = 𝛼 + 𝛽1 ∗ 𝑠𝑡𝑎𝑛𝑑 + 𝛽2 ∗ 𝑟𝑜𝑤 + 𝛽3 ∗ 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 + 𝜉
Seed rate is positively correlated to plant stand (σ = 0.692)
𝑦𝑖𝑒𝑙𝑑 = 𝛼 + 𝛽1 ∗ 𝑠𝑒𝑒𝑑 𝑟𝑎𝑡𝑒 + 𝛽2 ∗ 𝑟𝑜𝑤 + 𝛽3 ∗ 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 + 𝛽4 ∗ 𝑟𝑒𝑝𝑙𝑎𝑛𝑡𝑖𝑛𝑔 𝑑𝑎𝑡𝑒 + 𝜉
(1)
(2)
RESULTS-Replanting Model Residual 255702781 340 752067.002 Prob > F = 0
Total 372401095 350 1064003.13 R-squared = 0.3134
Adj R-squared = 0.2932
Root MSE = 867.22
yield Coef. Std. Err. t P>|t|
seedr 164.5665 66.768 2.46 0.014 33.234 295.898
seedr>35 -647.268 199.467 -3.24 0.001 -1039.614 -254.922
row pattern -313.1974 137.416 -2.28 0.023 -583.491 -42.903
1st week May 3123.356 301.965 10.34 0 2529.4 3717.312
2nd week May 2499.144 447.805 5.58 0 1618.326 3379.961
3rd week May 3181.459 294.375 10.81 0 2602.433 3760.486
4th week May 2757.397 289.265 9.53 0 2188.421 3326.373
1st week June 2989.193 307.988 9.71 0 2383.391 3594.996
2nd week June 2416.3 299.007 8.08 0 1828.175 3004.424
3rd week June 1701.822 599.608 2.84 0.005 522.412 2881.232
4th week June (dropped)
cons 2723.48 370.871 7.34 0 1993.987 3452.972
(95% Conf. Interval)
Enter normal or average yield expected according to your experience
Select location Enter initial planting date Select row pattern planting method used
Enter the plant stand achieved in plants per foot
Enter the grade expected for this normal yield expected
TSMK provided by USDA
THE TOOL
Enter the new planting date or replanting date
Enter the number of seeds per foot to replant
Enter the grade expected for the replanted yield expected
Enter other costs associated to the replanting operation as own consideration
Enter the amount of fuel (gallons per acre) considered to be spent for replanting
Enter the total number of hours per acre considered to be needed for replanting
THE TOOL THE TOOL
Conclusions
Replanting a sparse stand should be the last alternative.
Follow the UGA recommended practices to achieve good plant stand density.
When the replanting scenario is unavoidable, accuracy in the information provided is vital for the success of the process.
Controlling the costs discussed (seed costs in particular) is critical, given that the additional costs incurred by the grower when replanting could not be offset by the additional revenue achieved.
ACKNOWLEDGMENTS
Funding support provided by National Peanut Board and Georgia Peanut Commission
Committee: Dr. Nathan Smith
Dr. Joshua Berning Dr. Cesar Escalante
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